United States: OIG, CMS Focus New Scrutiny On Home Health Industry: Additional Investigative And Enforcement Activity Likely To Follow

Article by Elizabeth B. Carder-Thompson, Debra A. McCurdy and Devin J. Griffin

On June 22, 2016, the Department of Health and Human Services Office of Inspector General ("OIG") issued a comprehensive report detailing its nationwide analysis of common characteristics in home health fraud cases. In tandem with this report, the OIG issued an Alert on improper arrangements and conduct by and among home health agencies ("HHAs") and physicians. Essentially, the OIG has broadcast a warning shot—it will increase its already aggressive prosecution of home health services fraud.

The Centers for Medicare & Medicaid Services ("CMS") has also stepped up its own efforts to combat health care fraud. Specifically, the agency announced that it will implement a pre-claim review demonstration for HHAs in five states — Illinois, Florida, Texas, Michigan, and Massachusetts — identified as particularly susceptible to home health services fraud. This pre-claim review demonstration mandates that HHAs seeking Medicare reimbursement for home health services submit currently-mandated documentation to the Medicare Administrative Contractor ("MAC") earlier in the claims payment process. Although HHAs need not wait for a determination prior to furnishing services, the documentation is intended to determine if the service level complies with Medicare coverage requirements. CMS intends this review process to aid investigative and enforcement efforts by both CMS and OIG.

OIG June 2016 Report: "Nationwide Analysis of Common Characteristics in OIG Home Health Fraud Cases"

While OIG scrutiny of HHAs is not new in itself, the recent OIG report reflects an increase in the scope and nature of investigative and enforcement efforts to eliminate home health fraud, waste, and abuse. The report also evinces OIG's recent increased efforts to employ data analytics, including data mining, predictive analytics, trend evaluation, and modeling approaches.

Recognizing home health services as an area especially vulnerable to fraud, abuse and waste, the OIG conducted an analysis to assess the prevalence of select characteristics commonly found in OIG-investigated home health fraud cases. Specifically, it reviewed the national prevalence and distribution of selected characteristics commonly found in OIG-investigated cases of home health fraud. While fraud generally takes the form of HHAs' billing for services that are not medically necessary and/or not provided, the five distinct characteristics common to these investigations were:

  1. High percentage of episodes for which the beneficiary had no recent visits with the supervising physician
  2. High percentage of episodes that were not preceded by a hospital or nursing home stay
  3. High percentage of episodes with a primary diagnosis of diabetes or hypertension
  4. High percentage of beneficiaries with claims from multiple HHAs
  5. High percentage of beneficiaries with multiple home health readmissions in a short period of time

The OIG analysis then identified HHAs and supervising physicians that were statistical outliers with regard to those characteristics in comparison with their peers nationally. Also, it identified geographical "hotspots" that were either statistical outliers compared to other areas nationally or contained significant numbers of HHA or physician outliers.

In short, the OIG determined that, in calendar years 2014 and 2015, 562 HHAs (about 5 percent of all HHAs) and 4,502 physicians (about 1 percent of all physicians who supervise home health care) were outliers on two or more of the characteristics the OIG associates with home health fraud. Additionally, OIG identified 27 geographic areas in 12 states as hotspots for these home health fraud characteristics. The OIG proffered that "[w]hile there may be legitimate explanations as to why any of these specific HHAs and physicians were outliers...further scrutiny is warranted."

The OIG notes in the analysis that its home health investigations have resulted in more than 350 criminal and civil actions and over $975 million in receivables for fiscal years 2011-2015. In the past few months alone, there have been significant criminal and civil enforcement actions in the area of home health services. For example:

  • June 16, 2016— A licensed physician from Texas pleaded guilty to one count of conspiracy to commit health care fraud stemming from a scheme to defraud Medicare through the submission of false claims for physician home visits and home health care services. The physician, who remains on bond, faces a maximum statutory penalty of five years in federal prison, a $250,000 fine, and may be ordered to pay restitution.
  • June 1, 2016— Owners of an HHA were sentenced to prison terms for health care fraud, money laundering, and other charges stemming from a scheme in which they and others defrauded the D.C. Medicaid program of over $80 million. One defendant was sentenced to ten years in prison, the other to seven years. The presiding judge ordered them to forfeit $11 million seized from 76 bank accounts; their residence, worth approximately $1 million; $73,000 in cash seized from their residence; and five luxury vehicles with a total purchase price of more than $400,000. The judge also imposed a forfeiture money judgment of $39,989,956 on both defendants.
  • April 18, 2016— A federal jury convicted the head of an HHA on fraud charges for scheming to bill Medicare for millions of dollars in unnecessary services. The HHA manager directed employees to perform in-home visits with patients who were physically capable of leaving their residences and not in need of in-home treatment. The manager inflated costs incurred by Medicare by directing employees to bill treatment at the most complicated levels, even when visits did not qualify for elevated billing. The HHA manager was convicted on 21 counts of health care fraud and three counts of making false statements in a health care matter. Each count of health care fraud is punishable by up to ten years in prison, while each false statement count is punishable by up to five years in prison.
  • April 13, 2016— A Dallas physician and three owners of HHAs were convicted on various felony offenses, stemming from their participation in a nearly $375 million health care fraud scheme involving fraudulent claims for home health services. Each was convicted on one count of conspiracy to commit health care fraud and multiple counts of health care fraud, among other charges. Each conspiracy and health care fraud count carries a maximum statutory penalty of ten years in federal prison and a $250,000 fine. The obstruction of justice count and each false statement count carry a maximum statutory penalty of five years in federal prison and a $250,000 fine.
  • April 11, 2016— The owner-operator of a Detroit-area HHA pleaded guilty for his participation in a $4 million health care fraud scheme. The owner was convicted of one count of conspiracy to commit health care fraud.
  • April 1, 2016— A patient recruiter for several Miami-area HHAs was convicted for his role in a fraud and kickback scheme that resulted in the submission of over $2 million in false and fraudulent claims to Medicare. The patient recruiter was convicted of one count of conspiracy to defraud the U.S. and to pay and receive health care kickbacks and one count of receiving health care kickbacks.

The OIG's Home Health Alert Warns That Aggressive Prosecution Will Only Increase

In an Alert issued on the same day as the report, the OIG warned that "[i]n the past year, the Federal government has obtained criminal convictions and reached civil settlements with several home health agencies, individuals, and heads of home-visiting physician companies that defrauded Medicare" by "making (or accepting) payments for patient referrals, falsely certifying patients as homebound, and billing for medically unnecessary services or for services that were not rendered."

The OIG cautions HHAs and physicians to take extra care to ensure that arrangements between them reflect fair market value and are commercially reasonable even in the absence of federal health care program referrals. Additionally, the Alert cautions HHAs on the need to ensure that beneficiaries receiving their services meet the detailed regulatory requirements applicable to providing home health services, including that beneficiaries are confined to their homes and that specific services provided are medically necessary. The report also notes that OIG has investigated "home-visiting physician companies" that engaged in such activities as upcoding patient visits (i.e., billing at a care level higher than warranted) and billing for care plan oversight services that were not actually rendered.

CMS Bolsters OIG Efforts by Enacting Various Anti-Fraud Initiatives

In response to recent OIG activity, CMS has enacted its own anti-fraud initiatives. For example, it has imposed temporary moratoria on new HHAs in certain areas with high incidences of fraud and improper payments for home health care services. In addition, as noted in our earlier post, CMS announced that it will implement a three-year Medicare "pre-claim review" demonstration in Illinois, Florida, Texas, Michigan, and Massachusetts.


In sum, HHAs that provide home health services and physicians contracting with such HHAs and/or certifying the need for home health services should be wary of increased anti-fraud enforcement. Moreover, health systems and financial firms seeking to expand into the home health space through acquisitions and the like should exercise careful due diligence of the target entities.

This article is presented for informational purposes only and is not intended to constitute legal advice.

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